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German VAT

Germany introduced Value Added Tax in 1968.  The rules on German VAT registrations, returns and compliance are based on European Union EU VAT Directives which German has transposed into its VAT Act.  The tax is administered by the Ministry of Finance.

Foreign companies, or ‘non-resident’ traders, providing goods or services in Germany to local businesses or consumers may have to register their business for German VAT.  They will then have to follow the German VAT compliance rules, including invoicing and VAT rates, as well as pay over any German VAT due.

Should you register for German VAT?

There are a number of trading situations which typically require a foreign trader to register with the German tax authorities.  These follow the broad EU VAT rules, and  include:

  • Importing goods into Germany from another country, either from within the EU or from outside the EU
  • Moving goods between Germany and other EU member states (intra-community supplies), either as sales (dispatches) or purchases (arrivals)
  • Buying and selling goods in Germany
  • Selling goods over the internet to German consumers, subject to the German distance selling VAT regisration threshold
  • Goods held in consignment stock
  • Holding live exhibitions, events or training in Germany
  • If a company is otherwise a non-VAT trader, but is receiving services in Germany under the reverse charge rule
  • The self supply of goods

Few companies need to VAT register if they are providing services to local German companies, and instead can use the Reverse Charge process.  This is based on the 2010 VAT Package changes.

If you do need to VAT register, read our German VAT registration briefing to understand the requirements, including the VAT registration thresholds.  You can read more about German VAT returns too.

There may be further exemptions from the requirement to VAT register in Germany you should consider.  Please read our German VAT Reverse Charge briefing.

 

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